Invest in yourself: Your credit score is probably less important to your long-term economic success than your online reputation (image credit: wynlok)

My little sister is adventurous, generous and, in the best possible way, idealistic. As I write this, she’s volunteering as a counselor at a Palestinian summer camp. So I wasn’t surprised to learn that she recently traveled to Cyprus. Nor that she stayed with a complete stranger she met online through CouchSurfing, a website—make that movement—for finding accommodation and creating a better world “one couch at a time.”

But I was somewhat surprised when I saw pictures of her accommodations. Rather than the dirty hovel you might expect from a service targeting frugal travellers, her room was spacious and immaculate, the fortunate side-effect of staying in the home of an architect’s son. And, exceeding even the common generosity of the CouchSurfing community, her host even offered use of his car, a convertible Mazda Miata perfect for booting around in the Cyprus sun.

It’s the kind of accommodation and transportation that could set you back some cash. Except for one thing: you couldn’t buy it if you tried, because CouchSurfing’s rules expressly prohibit such commercial transactions. So whereas a decent hotel in Cyprus might cost you $100 a night, an architect’s house and a convertible (not to mention meals) are free.

Free, that is, if you have a good reputation, and the right attitude. Because while CouchSurfing doesn’t allow commercial transactions, it does require you to have credibility. If fellow CouchSurfers give you a poor rating, you’re out of luck. Violate core principles, and you’re out of the community completely.

CouchSurfing’s just one example of a growing reputation-based economy. Science fiction writer Cory Doctorow’s “whuffie,” a digitally tracked future currency based on reputation, now seems one of the more prescient predictions in recent years. A confluence of developments including information (and general) abundance, social media growth and transparency, and an increasingly unreliable financial credit system have driven the trend. Make no mistake: your reputation (and, particularly, your digital reputation) is now as important to your economic future as your credit score—if not more so.

From handshakes to credit score—and back

Long ago, in the dark ages before MasterCard, personal integrity was your credit score. We didn’t need elaborate algorithms for calculating your worthiness of a loan. If you had a good reputation, you could borrow from family, friends and the community. If you had a bad reputation, you were marginalized. Your handshake was worth more than gold. And the community’s memory rivalled that of a bank mainframe. People didn’t forget. If your grandfather’s grandfather screwed people, you were born tainted.

But for most of the 20th century, we disconnected personal integrity from credit worthiness. Your credit score was largely determined by things like your equity and, bizarrely, the amount of debt you were already carrying and able to manage. One of my older sisters (not the CouchSurfer; I have three) never claimed one of those ubiquitous student credit cards while at university. When she graduated, despite having a steady job with the government, she struggled to get credit. With no history of debt, she was essentially blacklisted. Meanwhile, the Kenneth Lays and Bernie Ebbers of the world had no trouble accessing capital, despite character flaws that would ultimately lead to their undoing.

What happened? As communities grew and dispersed, our ability to track reputation disintegrated. Doing business with people overseas, for example, it’s hard to know their reputation, particularly if you don’t speak their language or know anyone in their community. Ditto when our communities grew beyond the few hundred people our brains evolved to track. And then there’s the fact that integrity is a tough thing to measure. It’s pretty hard to track how many promises or handshakes people betray.

But it’s fairly straightforward to track people’s financial transactions. So why go through the arduous process of assessing character when you can much more easily track earnings, equity, debt load and repayment history? Hence your credit score became far more important than your reputation, allowing for national and international financial institutions to build obscenely lucrative businesses by extending credit to people they’d never met, and didn’t need to.

But all of that is starting to change.

From Visa to Facebook

Something’s happening now that’s returning us to a more communal, reputation-based economy. The massive growth in goods and services sharing—things like car sharing and couch surfing—is some of the most tangible evidence, as sharing doesn’t work without ways to measure and monitor reputation (as noted by collaborative consumption guru Rachel Botsman). Then there’s the explosion of interest in personal branding, the art of managing your image the way corporations manage theirs. In fact, there are now even entire businesses built to protect your reputation.

As I see it, there are three main trends driving the return of reputational capital:

1. Reputation helps us curate abundance. In his excellent book Free, Chris Anderson describes how an abundance of information on the internet helped give reputation monetary value. How so? With so much information, what’s scarce is attention. We decide what information to attend based on reputation. (That’s how Google works, for example; sites with many high-quality inbound links have a good reputation in Google’s eyes, hence rise up the search ranks.) When you have a good enough reputation to attract attention, you can monetize that attention with products, services or ads. But information isn’t the only thing that’s abundant these days. In industrialized nations, there is a general abundance of goods and services to meet our needs. We’re overwhelmed. So we determine what goods and services to attend based on reputation.
2. Transparent social networks allow us to measure and track reputation. And if you don’t think this is important, note that nearly half of employers review job candidates on social networking sites. Of course, bulletin boards, forums and chat rooms have been around awhile. What’s new, as noted by David Kirkpatrick in The Facebook Effect, is the level of transparency we now have with social networks. On Facebook, you use your real name and connect (mostly) to other real people. Ditto with services like LinkedIn. Everything you share there is recorded for posterity, and we’re becoming increasingly comfortable sharing a lot. Now add rating and “liking,” and you have a way of keeping score. You can try to avoid it by abstaining from social networks. But for many industries and jobs, the benefits of social networking—like the ability to use your reputation and network to attract business—outweigh the risks. It’s now much easier to track handshakes, no matter the number, distance or language of your connections.
3. Our relationship with credit is on the rocks. After the recent financial apocalypse, a lot of people have basement-dwelling credit scores. Hell, a lot of countries have basement-dwelling credit scores. And as much as governments try to stimulate economies with more borrowed cash, it’s doubtful the days of delirious debt spending are coming back. Americans in particular are maxed out, with the US now having the lowest savings rate—recently dipping into negative territory—since the Great Depression. (China’s savings rate, by comparison, is 30% to 40%, which the US has, oddly, tried to partly blame for the recent financial crisis while further spending itself into debt.) With credit no longer a clear marker of borrowing worthiness (especially in places where people have negative home equity due to the financial crisis), reputation has returned in importance.

Unlock wealth with your name

All of this suggests that cultivating a good reputation (and, generally, being a good person) could provide greater return on investment than most financial investment vehicles. For example, sellers on eBay with a good reputation tend to sell items at a higher price. And people who contribute to open source projects, like Linux, can translate their reputation-building contributions into lucrative jobs.

Let’s take a more concrete example. Imagine you put $1,000 today into an impossibly high-interest 12-month investment. Go nuts and imagine 10%, even though the highest guaranteed 12-month investment you’re likely to get with any bank right now is less than 2% in Canada. One year from now, you’d have yourself an extra $100. Which is about the cost of a one-night stay in a Cyprus hotel. Cultivate a reputation on CouchSurfing like my sister, however, and you could get yourself a weekend’s accommodation free, with food and, in at least one case, a car. Which, even just considering a two-night stay, is worth at least twice as much as your unrealistically high 10% interest return. Better yet, you need no principal (unless you want to build your reputation by hosting guests), meaning all you need to invest is your time.

So clearly, your reputation is worth something. Build it up. And try not to max it out.

Why own when you can rent? A growing trend provides viable options for transportation, fashion and more (credit: Quinn Anya)

Imagine winning $10,000 a year for life.  It doesn’t seem like much, but over 25 years, you realize that it’s a quarter-million dollars. Then you sit down and calculate the compound interest. At a conservative 3% per year, you’re looking at about $375,000. Not bad for free money.

That’s roughly the calculation I did a few years ago when I sold my car and switched to public transportation and car sharing. With lease, insurance, gas, maintenance and parking, I was paying about $15,000 a year. Granted, it was a sports car. But, depending on how far you drive each year, you’re probably paying $10,000 to $15,000 a year, or over $0.50 per mile. And that doesn’t include externalities like the environmental impact of car production and use.

I’m no saint, and admit to a bit of a gadget fetish. But since I sold my car (and my wife sold hers), and took what many would consider a step back—owning a car, after all, is a right of passage in North America—I’ve felt as liberated and free as the owner of a new convertible sports car is supposed to feel.

And increasingly, I’m not alone. From cars to designer clothes to children’s toys, there’s a growing trend towards “transumerism” and “collaborative consumption,” which emphasize sharing, renting and experiencing over owning. Is it just a fad? Or is this a significant trend that will reshape our approach to goods and commerce? I’ve pondered what I call “cloud living” before. Now let’s dig deeper.

Transumerism taking off

You need not look far to find examples of this trend. Parking lots in urban areas host cars from car sharing services like Zipcar and AutoShare. If you want a more upscale ride, services like Extreme Car Share and DFW Elite Car Club will get you into a Ferrari, Lamborghini or other midlife-crisis resolver. Want to fly? Try Net Jet. Prefer human power? Try a bike-sharing service like Bixi.

And while the trend seems to have taken off with transportation (likely due to a combination of high transportation cost and intermittent need), it’s by no means confined there. In fashion, there are services like Wear Today, Gone Tomorrow for clothes, Bag Borrow or Steal for handbags, and Borrowed Bling for jewelry. Have a child? Then you might be interested in toy rental services like Kids e-Toys and Lucky Duck Toy Box (choose toys, rent toys, return them when your child grows out of them, get new toys for their next phase). There are even entire publications now devoted to the trend, such as Shareable.net.

And I haven’t even yet mentioned computers yet. What is “the cloud” if not a prime example of transumerism? With cloud computing, you get computational services on demand. Why buy a server with set storage space and processing power—the former of which you’ll have to grow into, the latter of which you will always use sporadically—when you can get storage space and processing power on demand, paying just pennies for gigabytes and cycles as needed?

Indeed, I believe one of the biggest drivers of the transumerist trend is computer technology. First, as we increasingly use the web on a transactional basis—loading and retrieving content like photographs as needed—we’re being trained into a transumerist mindset. Second, as we utilize crowdsourced services such as Wikipedia, we recognize the power of collective ownership and contribution, and see how shared resources can actually be better than individually owned resources such as a thousand-dollar set of encyclopedias. Third, the increasingly social web has made us comfortable sharing—including with random strangers. Fourth, web technology has enabled services that would otherwise be impossible or difficult to use—to book a car with AutoShare, for example, I can just open the iPhone app, pick a time and a car, and press “Reserve.”

But computer technology isn’t the only factor. Rather, several social and economic factors have also converged to make renting and sharing more attractive, in many cases, than ownership. First, we are becoming an increasingly mobile society, including with jobs (fewer of which require fixed machinery), and owning more stuff makes mobility more difficult. Second, the generation now entering the workforce has different priorities from previous generations, emphasizing experiences and work-life balance over material possession. Third, economic instability has made ownership of even traditionally sound investments (like homes) less desirable—after the recent financial calamity, many Americans are now burdened with negative home equity. Fourth, environmental sensitivity (no doubt heightened by high-visibility ecological disasters like the Gulf oil spill) has made people more sensitive to purchasing new goods, leading to lots of goods exchanged for free through Craigslist and services like Freecycle.

And that’s just scratching the surface.

Guidelines for collaborative consumption

Seeing all this happening, and experiencing the benefits first-hand, I’ve become somewhat of a transumerist evangelist. (I also keep pondering entrepreneurial opportunities in this emerging space—what’s next to move from ownership to sharing?) While there are no hard and fast rules for the emerging transumerist worldview, I wanted to capture some of my own changes in mindset:

1. Ownership is a last resort. The question used to be, “Why rent when you can own?” This most often applied to homes, but people would often apply it to other possessions as well. I would now ask the opposite question. Why own when you can rent or share? The primary reasons to own, in my opinion, are appreciation in value (if that appreciation offsets negative implications of ownership) and high frequency of use. Most other benefits usually aren’t worth the tradeoff. Which brings me to the next point.
2. Ownership is a tradeoff. One of my favorite lines from the movie Fight Club is this: “The things you own end up owning you.” (Followed by: “It’s only after you lose everything that you’re free to do anything.”) We’re saturated in marketing messages (and I’m a marketer, so am partly responsible) that describe the benefits of ownership. Why own a car? Well, freedom, of course—freedom to go where you want, when you want, while attracting the hottest members of the opposite sex. No successful marketing campaign will promote the risks, side-effects and negative repercussions of ownership (except, perhaps, when compelled by law, such as with medications). But they’re always there. With cars, for example, there are things like maintenance costs, depreciation and, of course, worrying about things like theft. Because of these concerns, the car you own, which promises freedom, will always own you and, in some way, restrain your actions.
3. Ownership always looks better in hindsight. One interesting finding from research in behavioral economics, and documented in Dan Ariely‘s excellent book Predictably Irrational, is that we overvalue things we own. This includes material possessions, as well as our ideas (admittedly including my ideas in this post). Why, when selling something, do you usually think it’s worth more than when you’re buying something? Because we become quite irrational about things we own.
4. Experiences provide more lasting happiness than material possessions. Research on well-being has long attempted to correlate material wealth with happiness. And findings consistently show that money only makes us happy to a point (about $60,000 per year, according to some research). What’s more, purchasing experiences make us happier than purchasing material stuff. One of the reasons is that our nervous system becomes accustomed to our stuff, the way drug addicts become accustomed to their drugs and must increasingly up the dose to get high. A Porsche in the driveway will make you happy today, perhaps, but one year out you’ll be pining for a Ferrari. But you’re just treading water; you have to keep upping the ante just to maintain the initial high. Experiences, like travel (and, say, having access to, but not ownership of, cool cars), are different. They appear to provide lasting value, in part because they give us stories to tell repeatedly, and because they often form the foundation for happy memories.

Of course, transumerism is no panacea for all social, environmental and economic ills. It’s hard to see, for example, how a luxury car sharing service is better for the environment or your wallet than owning and riding a bike instead. What the trend should increasingly bring, however, are options, and perhaps a growing consciousness of ownership’s costs. Will I ever buy a car again? I can’t say for sure, but right now, I hope not. I’ve become far too accustomed to the freedom of not owning one.

Heavy experience: With ancient, multi-ton-stone structures like these, Israel is a grounding place

“There’s no wi-fi here,” said the security guard manning the doors to the Jerusalem Archaeological Park, a sprawling site where archaeologists are digging through ancient rubble. I had just left the park after spending hours wandering thousands of years of Jerusalem’s history, and had pulled out my iPhone to check the time. The guard pointed to the Western Wall, a 2,000-year-old revered Jewish religious symbol. “If you want wi-fi,” he said, “go by the Wall.”

Such is Israel, a state caught not only in political and religious tension, but also in tension between the ancient and the ultra-modern. Sometimes—as in the dazzling Tower of David multimedia light show, displaying artistic stories of history on top of the history itself—the tension yields unique creative offspring. Others—as in the cellphone-wielding worshippers at the Wall—it just feels sacrilegious, superficial or both. Towering, lasting monuments of thousand-year-old civilizations make modern artifacts like my iPhone seem ludicrously transient, given that it became obsolete one year after I bought it.

And that grounding is probably the lasting legacy of my recent 12-day trip to Israel, from which I returned April 15. For a place so suffused with religious and political anxieties, you’d think it would feel much less secure. Granted, the pervasive presence of 18-year-old machine-gun-toting conscripts and metal detectors help. But the land and structures themselves exude permanence, from the mountainous deserts to the Jerusalem stones that compose the Old City. This country has outlasted much turmoil in its 4,500-year history.

That’s not to say it’s not tumultuous. I spent five days on this trip visiting a kibbutz, Ketura, in the desert (yes, back to the desert again), where my baby sister is currently studying at the Arava Institute, a school that brings Arabs and Jews together to discuss common challenges with the environment. (Slogan: “Nature has no borders.”) My wife, Anna, worked at Arava several years ago, and we were graciously welcomed into the community for our stay. That stay coincided with Holocaust Memorial Day and its attendant sirens and documentary television shows describing the events of WWII and their impact on the world today. (We also visited Yad Vashem, Israel’s devastatingly powerful Holocaust museum.) The history and politics are inescapable.

As is the danger. Visiting one of Anna’s cousins in Israel, Anna remarked on how jealous she was of their walk-in closet. Turns out the closet is a bomb shelter (apparently mandatory in residential buildings). On their fridge is a map of Israel showing how long people in different regions have to find shelter before a missile hits them from the north. I asked her cousin’s husband how this affects them. “We find it boring,” he said, although his English is limited. I think he simply meant that this is their daily reality. Like traffic jams or something.

All in all, I would recommend visiting Israel, for many reasons. Historical grounding is one. Getting a first-person sense of the country, its people and its challenges is another. (As with any situation, the reality is far more complicated than can be explained in a 30-second news clip.) And then there’s simply the fact that for such a small country—Israel’s about the size of New Jersey—it has a surprising diversity of people, perspectives, landscapes and historical sites. So much so that 12 days left me wanting more (particularly Jerusalem), and I hope to return. Maybe one day I’ll upload an update to this post from beside the Wall.

Research suggesting that older people are happier bodes well for radical life extension (credit: babasteve)

It’s hard to believe. But despite our culture’s emphasis on youth, young people aren’t all that happy.

In fact, the happiness trajectory is u-shaped. On average, we start life happy and get increasingly miserable until age 40. Then we get happier from about age 46, with the peak of happiness coming at age 74, according to recent research.

The explanation is essentially twofold: decreasing stresses after 46, and increasing perspective and emotional maturity. But what about beyond 74, particularly with demographics skewing older and the prospect of radical life extension?

Years ago, I advocated for radical life extension as the founder and editor of website Betterhumans.com. Back in 2002, conservative bioethicist Leon Kass rustled feathers with a pro-death, anti-life extension stance.

In light of the latest research, we may have more reason than ever to think that Kass is wrong, and that a longer-lived population would be a happier, wiser population.

Of course, 74 isn’t a radically life-extended age. But my hunch—and one I’d love to see tested—is that happiness declines from here are primarily related to declines in physical health. In this case, should radical life extension also mean radical health extension, the future’s looking like a happy place.

Update on March 6, 2010: I’m happy to report that a representative from Bloomex called me the day after this incident to address my concerns. Turns out that I missed the cutoff period for a 9 AM to 12 PM delivery, and that they delivered roses instead of daisies because they were out of daisies and upgrading in such situations is their policy. They provided a credit and refunded me the early-delivery fee. This addresses many of my concerns, but not all (for example, the message to my wife being stapled inside a brochure).

While I’m pleased with this after-the-incident customer service, and give Bloomex kudos for that, there are a few things that could prevent such situations in future, and for what it’s worth I offer them here for the Bloomex team: (1) change your checkout system to prevent people from selecting and paying for delivery windows that are unavailable for their order; (2) make your substitution policy explicit, and possibly let people choose their substitutions—or better yet, if possible, improve your inventory management to prevent the selection of out-of-stock flowers; (3) improve your real-time customer service, including by educating and empowering chat operators and ensuring phone responsiveness. I also noticed that Bloomex has a Twitter account, and is now following me. Recommendation (4) is to more closely monitor and respond to Twitter commentary, and respond in Twitter to address customer concerns and neutralize negative sentiment and its spread.

The original blog post follows:

I’m not one to rant about minor inconveniences. But I just had a terrible experience ordering flowers for delivery in Toronto from Bloomex. As a potential warning to anyone who might be considering doing the same, I offer this review. (And for anyone in online sales or marketing, take note of what not to do.)

For my wife’s birthday today, I wanted to have flowers delivered to her office in Toronto. My plan was to include a note telling her where to meet me for dinner. A nice thing to do, I thought, to show someone important to me that I care about her on an important day.

So yesterday, I searched for flower delivery services in Toronto. Bloomex came up, and I reviewed their flowers and, importantly, their guarantee of pre-noon delivery if you place an order before 1 PM the previous day.

I decided to proceed, and chose gerber daisies, which have particular significance for my wife. I entered my credit card details, chose a pre-noon delivery time, submitted my order and received confirmation.

Then the trouble started.

As of noon today, no flowers, and my wife had no idea where to meet me. So I called Bloomex, navigated the customer service line, and got a message saying nobody was available by phone so I should use the online chat.

So I used the online chat, which dropped my session twice before the rep told me that they would look into the problem with their delivery partner, and I would get an email from their customer service rep shortly. (I have the chat saved, in which the rep assures me that I’ll be reimbursed because Bloomex didn’t live up to its delivery guarantee.)

So I ruin the surprise and tell my wife by text where we’re going for dinner. She calls me soon after, at about 3:45, to say that the flowers finally arrived.

Only they’re the wrong flowers!

Red and white roses, not the daisies I ordered. And worst yet, rather than including a nice card with the note I entered online, the flowers came with a 15%-off brochure for Bloomex into which my note was stapled. It was so hidden that my wife almost threw it out before she found it.

Needless to say, this is one of the worst experiences I’ve had ordering anything online. Perhaps my experience is an anomaly. But I doubt it. So if you want to order flowers for delivery in Toronto, you may want to consider using a company other than Bloomex.

(Note: I intend to update this post with more details and documentation as time permits.)

All hail King Cloud (image credit: akakumo)

Last week, I presented a seminar on cloud computing for the Business Knowledge Initiative of the Newmarket Chamber of Commerce. The seminar covered the subject’s essentials: what it is, why it matters, and what to do. But increasingly, I think computing is just the start—or at least just a part—of a much larger cloud trend.

When we speak about “the cloud,” we mean computing that involves:

• No up-front (capital) cost
• No physical infrastructure for us to maintain
• Payment for usage (not ownership)

In the IT world, this means that you don’t buy a server, create and maintain an infrastructure to support it, and buy processing power and data storage to support extreme scenarios (for example, a one-terabyte hard drive that you may fill eventually, but not immediately, and perhaps never). Rather, you buy processing power and data as required (for example, you buy storage for your digital photos as you need it). While this has some downsides, the benefits are appealing—which is reshaping the technology landscape, creating new technology powerhouses such as Salesforce.com.

But to me, that’s just the most obvious example of the cloud. Other trends are afoot that suggest a general shift away from up-front investments and ownership of physical goods. For example:

• Car sharing services like Zip and AutoShare (you don’t own a car; you use a car when required)
• Other “transumer” services, such as for renting purses and designer dresses
• On-demand media services like Spotify, Netflix and Apple TV (you don’t own songs and videos; you pay to listen or watch when desired)

In fact, having realized the cloud’s benefits in business (using Salesforce.com for customer relationship management and more) and personal life (as members of AutoShare, my wife and I own no car), I’m starting to think the concept of the cloud should be extended to, more generally, “cloud living.” So I’ve begun looking for opportunities to eliminate capital investments and physical ownership throughout my life, and to shift towards pay-per-use or other more cost-effective approaches. I’ve recently decided, for example, to divest myself of physical books and shift towards e-books and (gasp!) using our local library.

What about you? Have any ideas for embracing the cloud? I’d love to hear them in the comments.

The price of personal freedom is dropping

Unless you live in a wifi-proof cave, you probably know that Google’s launching a phone. But unless you’re at least modestly nerdish (sign: you obsess over the best way to sync files between devices), you may be paying less attention to the subtext and implications. Google’s phone will likely be sold unlocked, meaning no contracts necessary. It will also have wifi, meaning you can access the web—and, importantly, Google Voice, Skype and other voice services—from home and the growing number of free wifi hotspots around the world. Better yet, with white space wifi becoming a reality, and big tech players supporting its use for subscription-free wireless plans, you could have free internet and phone calls everywhere. (Rumors are that Google’s new phone can work with white space frequencies. We’ll likely know more January 5.)

Just another tech story? Not if you’ve been following the bigger story, as described brilliantly in  the book Free by Chris Anderson. When (not if) free wireless and free voice calling become a reality, it will eliminate yet another common cost for the wealthy and—if, as planned, made widely accessible—provide unprecedented information access for the poor. My current cell phone plan costs about $75 per month, my current internet plan about $30, and my current home phone about $30 as well. (I’ll leave aside the rationale for each—it’s complicated.) That’s about $135 a month, or $1,620 per year. I’m fortunate to have a well-paying career, but to someone making about $10 minimum wage in Toronto, $100 a month is equivalent to 120 hours of work per year—or about three weeks of labor.

Such rapid deflation—let’s call it “freeflation”—is unprecedented. Economists worry about deflation because dropping prices mean that people postpone purchases, and postponed purchases slow economic growth and trigger or exacerbate recessions. Fortunately (for economies, but not necessarily individuals), prices usually go up. That’s particularly the case with scarce resources like oil: if supply shrinks but demand remains steady or rises, prices go up. An oversimplification to be sure. But one thing’s certain: runaway inflation’s bad, but deflation—under traditional economic models—can be equally so.

But freeflation? There’s no real precedent for what we’re experiencing. In just a few years, we’ve seen the price of access to encyclopedic knowledge drop from thousands of dollars to free, making that knowledge both universally accessible and more comprehensive. There are parallels throughout information technology, communications and publishing. Everything Midas touched turned to gold. Everything the internet touches, it seems, turns to free. And rather than postpone purchasing decisions, free speeds consumption. But consuming information doesn’t diminish it; rather, it usually creates more information.

From computers to couches

The reasons underpinning freeflation have been well-documented by people like Anderson and, while he more rarely discusses the economic implications, Ray Kurzweil. Basically, everything digital seems to follow a type of Moore’s Law. Computer processing power doubling every two years (or so) is the most well-known phenomenon. But data storage now appears to be at least doubling annually, a phenomenon sometimes referred to as Kryder’s Law. That means around 2020, you’ll be able to purchase 14 terabytes of data for $40, enough to hold about 3.7 million high-resolution photos.

But you probably won’t purchase that storage. Why? Because it’s equivalent to $2.86 a terabyte, and there are undoubtedly better ways to monetize that storage than charge you for it directly. (One of them is advertising, which is what Google uses to subsidize its free offerings.) And while these monetization strategies might carry some cost—like how advertising steals some of your attention—most of us will be okay with it, as we are now.

Certainly, some might argue that I’m ignoring very real physical requirements, like houses and food and heat and clothes and transportation. And, right now, these indeed remain costly. The point isn’t that everything will, immediately, become free. The point is that the trend for many things, and pretty much everything that gets digitized, is towards free. And this trend is not confined to information products alone. Information products—first text-based, then still photography and audio, now video—came first because they were the most amenable to digitization. But we’re also increasingly seeing the facilitation of free by information technology, through services like Craigslist (which allows people to easily give away free products and services), CouchSurfing (which allows people to find and offer free accommodation for travelers) and PickupPal (which allows people to offer and hitch free rides to get to those couches).

Next up is almost certainly energy production; solar panels, as Anderson points out, are like the circuits we’ve become so good at improving exponentially. Make energy an information technology and it, too, should ride a curve of increasing efficiency. In fact, Google is working directly in this area because—due partly to the increasing cheapness of hardware—energy is one of its biggest costs. And while it’s likely further down the line, 3D printers (which you can now buy—watch this and blow your mind) and molecular manufacturing promise to essentially make the entire physical world information technology, due to the fact that the plans for physical goods will be distributed as information, with many plans likely developed and distributed as openly and freely as Wikipedia.

While I’m interested in the technological aspects of these changes, I’m also intrigued by the social implications. After all, freeflation promises not just a bounty of free products and services, but also a potential bounty of free time due to less need for moneymaking labor. I’m by no means predicting “the end of work” or some information technology-spawned utopia. But I do think drastic social changes are inevitable, and that the potential for creating happier lives—built not around increasingly available (and hence decreasingly scarce and valuable) material stuff, and more around the social connections, experiences and pursuits that truly make us happy—is at least a possible, and definitely a desirable, outcome.

Call me when it happens and we can discuss.

No charge.

Even Jedi need advisors (credit: niallkennedy)

Imagine walking into your doctor and asking “Why are you doing this job?” Or, for that matter, your local grocer, pharmacist or even barista. It would seem an odd question. Clearly they have their reasons. And must get some benefit.

Yet as a marketing consultant, I’m often asked that question. Or, more specifically, what’s implied is “Why are you a consultant and not working directly for a single company?”

So I think about it often. For what it’s worth, if you’re considering a career in consulting, here are my six top reasons:

1. Variety. Truth be told, I get bored easily. I like the variety of working on several different initiatives, in several different industries, with several different people. It’s like the difference between a one-course meal and an unlimited buffet served by a parade of chefs. If you hate variety, and like stability, consulting probably isn’t for you.
2. Education. If hands-on experience is a great teacher, hands-on experience with multiple businesses is a university. Working with one company for several years typically exposes you to a single mode and model of thinking. Working with several companies simultaneously exposes you to a diversity of models, processes and people. You can learn about what works and, importantly, what doesn’t. Then you can adapt and apply what you learn, gaining personal experience and building your own models and processes based on comparative performance.
3. Challenge. Building businesses is fun. But there comes a point, often (although not always), when businesses or business units reach homeostasis, and bureaucracy replaces innovation and change. For some people, such comfort is desirable. But growth requires at least a bit of stress. So if you want to continuously grow, consulting might be a good stimulus.
4. People. If you like meeting interesting people, consulting is the business equivalent of dating. Sure, some dates won’t work out. But when you click with someone, the resulting relationship can be mutually nourishing. And last a lifetime.
5. Opportunity. I used to love fishing. And particularly fishing with a float. I’d throw out the line and wait for the float to disappear beneath the water, pulled down by a mysterious fish that I couldn’t wait to see. As a vegetarian, I now find it hard to justify inflicting such harm on animals for fun. But I still love the thrill of fishing for opportunities.
6. Helping. Call me New Age if you like, but it’s a good feeling when you help a client overcome a business challenge or maximize an opportunity. Sure, you can help your own business grow (and, running a marketing consulting firm, I do). But watching someone you’ve helped succeed adds an element of giving back—of doing well by doing good.

Might I tire of consulting one day? Perhaps. (And, admittedly, there are many frustrations that I’ll save for future posts.) But for now, I still find it exciting and fresh. Which leads to the question: Why aren’t you a consultant?

Ownership is overrated; sharing can improve your wealth, improve the environment and increase happiness-inducing social connections (credit: ryancr)

A few days ago I read about Rent the Runway, a New York business that lets members share rather than buy expensive designer dresses. Which makes sense, because Bag, Borrow and Steal already lets them share accessories, and they can get to their fancy shindig in transportation shared through Zip, AutoShare, “ écurie25 (for supercar fans) or—if they need to fly—NetJets.

And why not? As an AutoShare member, I can attest to sharing’s benefits. I used to own a sports car. While it was fun to drive, it returned too little value for time and money. So I unloaded it a few months ago and now save nearly $1,000 a month in lease, gas, insurance, parking, registration and maintenance costs, while simultaneously reducing my carbon footprint and increasing my productivity by using laptop-friendly public transit. And when I need a car? There are six AutoShare vehicles within a two block radius.

Having reaped sharing’s rewards, I can only think the trend will continue. And few segments of the economy are immune. From a financial and environmental perspective, sharing makes sense. Why pay for a car 365 days a year, 24 hours a day when you’re only driving it a fraction of that time? Why produce a car (or two) for every person when several people can share one? Fractional ownership can reduce our financial burdens and environmental impacts. And as Rent the Runway shows, we can still live like queens—with better wardrobes.

Some might argue that there are downsides. One that comes to mind is the tragedy of the commons, in which common goods get destroyed by individuals acting in their own best interest. But that tragedy doesn’t apply when businesses control the resource being shared, because their interest is maintaining the common good—and canceling memberships can halt others from exploiting them. Furthermore, as a member of a car-sharing service, I can say that members will protect common goods they rely on. And since you always know who had an item before it got damaged, a bit of social pressure helps keep people honest.

What about “pride of ownership?” It can be replaced by pride of membership. And since ownership of material goods brings little happiness, buying stuff is a bad investment in well-being (although our psychological predispositions and sociological influences tend to make us think otherwise). On the other hand, social connections do bring happiness. So sharing services leave us with more money to pursue happiness-inducing experiences, while simultaneously connecting us to other people. It’s a win-win for happiness.

No doubt our modern, internet-soaked world contributes as well. “Share this” has grown from a link beneath people’s blogs to an ethos. Whereas individuality and privacy once reigned supreme, we now crave social connectedness and openness. The thought of sharing clothes with strangers doesn’t seem so bizarre after you’ve posted half-naked pictures of yourself on Facebook and followed them up with a status describing today’s lunch. And what are crowdsourced common-goods like Wikipedia if not monuments to sharing, in this case of time and expertise?

So where might this be going? I’ve begun thinking of businesses that can work on the sharing model, and I believe that many will be tried. Why buy clothes for fast-growing children, for example, when you could visit a local clothes share? Why buy a scooter when you can grab a Vespa from the lot across the road?  Certainly, there are some things we’ll want to own. (I imagine underwear sharing might not work so well.) But I’ll bet that for everything people would share, someone will create a (likely profitable) business to facilitate it. And your wallet and the planet will probably thank them.

Money doesn't grow on trees, but GDP says so (image credit: waɪ.ti)

Recently, I signed up for Jigsaw. If you’ve never used it, but do any sales for business, you should start. Jigsaw provides often hard-to-find business contact information—think vice-presidents at Fortune 500 companies—to subscribers. This in itself wouldn’t be interesting; other companies provide such a service. What makes Jigsaw different is the model.

The model is a wonderful example of the emerging freeconomy, as described so well in Chris Anderson‘s recent book Free. Sure, you can pay for access to Jigsaw contacts if you have the money. But if you have less money than time, you can contribute to the Jigsaw community by adding or updating contacts from your own database. That earns you points you can use to download contacts. It also helps Jigsaw rapidly grow one of the largest, most accurate and regularly updated business contact databases in the world. It’s the Wikipedia of Rolodexes.

That alone is a marvel of modern technology and network effects, what the pundits these days like to call “social media” (an arbitrary and ambiguous term, as I recently ranted in this Commune post on marketing with “social media” feeds). But what struck me as I began using this service, given my focus these days on happiness and economics, is how poorly our existing economic indicators capture this value.

The primary economic indicator in most industrialized nations is gross domestic product, which is essentially a measure of how much money changes hands. Chop down a tree and sell the wood, GDP goes up. Process the wood and sell paper, GDP goes up. That’s an over-simplification, but even in this simplified model, it’s easy to see what gets missed. Didn’t the tree, for example, which gives shade and cleans the air for no monetary value, still have some nonmonetary value? Is that value more or less than the value of the paper we made from it? Such issues are driving attention in alternative indicators of progress, such as Bhutan’s Gross National Happiness.

With the freeconomy, GDP gets even more detached from reality. Sets of encyclopedias used to sell for thousands of dollars. Today, Wikipedia offers millions of articles free, articles that were freely created. Did the value of an encyclopedia disappear because nobody’s paying? Did the value of contributing to an encyclopedia suddenly drop to zero? Did it shift to the cost of accessing the internet through ISPs? If so, what happens when we use free internet access, becoming increasingly prevalent at coffee shops and even some cities?

Strictly measuring GDP, we can’t put a value on things without price. But that doesn’t mean they’re not valuable. Tools like Wikipedia and Jigsaw add tremendous value and measurably improve people’s lives. But we’ll never realize how much until we change what we’re measuring.